Zika outbreak carries economic risk

February 1st 2016 | Multiple countries | Disease trends

Event

An outbreak of a mosquito-borne virus, Zika, has spread rapidly throughout Latin America and the Caribbean, and has so far been detected in 24 countries, according to the latest figures published by the World Health Organisation (WHO) on January 29th.

Analysis

The number of reported cases of the Zika virus in the region has climbed in recent months, most notably in Brazil, where around 1.5m people were affected last year. Although previously considered a fairly innocuous virus, a surge in the same period of infants born with microcephaly, a congenital condition associated with unusually small head size and stunted brain development—from a few hundred in previous years to 3,500 since October 2015—has led medical researchers to draw a link between the two.

The stance of governments of affected countries has varied, with Colombia, the second most-affected country, urging women not to fall pregnant for six to eight months, a directive also taken by El Salvador. In Brazil the government has deployed almost 220,000 troops to eradicate mosquitoes and distribute information to citizens about how to protect themselves from the virus and stop it from spreading within their communities.

In response to the rapid spread, the US Centre for Disease Control and Prevention has issued a level-two travel alert, encouraging tourists, particularly pregnant women, to exercise enhanced precaution when visiting affected countries. For many tourism-dependent economies in the region—particularly among the smaller island economies in the Caribbean, where the contribution of tourism to GDP is disproportionately high—the outbreak could pose a significant threat to growth this year, depending on how it develops over the next couple of months. This threat was highlighted by a recent poll by On Call International, a US-based travel risk advisory, which found that around 64% of those surveyed intended to cancel planned visits to the region. Of particular concern in this regard is Brazil, which is due to host the Olympic Games in Rio de Janeiro this summer; a significant fall in visitors during the games would be a massive blow to its beleaguered economy, worsening the already-troublesome outlook for the government, led by Dilma Rousseff.

Impact on the forecast

We will monitor closely the development of the outbreak and, in particular, its impact on tourist arrivals, as well as its burden on the healthcare systems in affected countries and its potential demographic implications, and adjust our regional growth and fiscal forecasts accordingly.